Cost segregation look-back study: catch up on the depreciation you missed

By CostSegregationMatch · Rules and prices checked October 7, 2026 · How we make money

Yes, you can still do a cost segregation study on an eligible older property. If you bought or built a rental or business building in an earlier year and never did a study, a look-back may let you catch up on the depreciation you missed.

For a qualifying accounting-method change, you generally do not amend all the old tax returns. Your tax preparer files IRS Form 3115 with the return for the year of change. The prior-year difference generally comes through as one catch-up deduction, before any limits on how much you can use. (IRS Form 3115 instructions)

Start with two numbers: how big the catch-up is, and how much of it you can use this year. This page helps you estimate the first and ask your tax preparer about the second. It also shows what a look-back really costs and who does each step.

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What is a cost segregation look-back study?

A cost segregation look-back study is a cost segregation study done on a building you put into service in an earlier tax year. It identifies parts that qualify for shorter depreciation lives as of their original service dates. The catch-up calculation then compares the corrected depreciation with what you already deducted. Your filing route determines how to claim the difference.

People also call it a lookback study, a retroactive cost segregation study, or prior-year cost segregation. They describe the same general task; the name does not decide your filing route.

The IRS addresses this directly. Its own Cost Segregation Audit Techniques Guide, chapter 6.B, discusses studies on property already in use and changes made with Form 3115 and a "Section 481(a) adjustment." A negative adjustment is the catch-up deduction.

Which situation are you in?

How long ago you bought matters less than what you have already filed. Find your row.

"Placed in service" means the date the building was ready and available for its intended rental or business use. That can be later than the day you bought it. (IRS Publication 946)

Why not just amend? A permissible depreciation method is generally adopted on the first return. Using the same impermissible method on two or more consecutive returns generally also establishes a method. Changing an adopted method normally requires IRS consent through Form 3115. Specific exceptions can allow an amended return or AAR. The one-return case has its own rule in Rev. Proc. 2025-23, section 6.01(1)(b); disposed property has a separate rule in section 6.07. (Publication 946: amended returns and accounting methods)

Look-back calculator: estimate your catch-up

Enter when the building went into service, its original depreciable basis before accumulated depreciation, and the amounts a study might move to shorter lives. You get an illustrated catch-up, the extra deduction for the selected change year, and what it could be worth after fees.

The property estimate assumes one service date and a standard depreciation schedule. It does not identify eligible assets or decide how much deduction you can use. Confirm the displayed assumptions, or use your tax preparer's figures for a property with different facts.

Already have numbers from your tax preparer? Switch to that tab and enter them instead.

A worked example

This is a made-up example to show the math. It is not a prediction for your building.

• A residential rental, bought used in July 2022 and placed in service that month.
• Building basis: $660,000. Land is not included.
• Suppose a study moves $99,000 into 5-year property (things like appliances and carpet) and $33,000 into 15-year property (things like paving, fences, and landscaping).
• The change goes on the 2026 return.

This example assumes an eligible used-property purchase after September 27, 2017, with no election out of bonus depreciation or other disqualifying condition. The short-life parts therefore qualify for 100% bonus depreciation: all $132,000 would have been deducted in 2022. (IRS Notice 2026-11)

It also assumes continuous rental use, no later improvements or sale, no requirement to use the alternative depreciation system (ADS), and the standard 27.5-year building schedule with the mid-month convention. The old schedule is a comparison baseline, not permission to keep using an incorrect method.

The catch-up is the gap: $198,400 − $83,000 = $115,400. That goes on the 2026 return.

Now look at 2026 itself.

Notice two things.

Regular depreciation goes down after a study, from $24,000 to $19,200 a year. You pulled deductions forward. You did not create new ones.

So the extra deduction for 2026, before tax-loss limits, is $110,600. The $115,400 catch-up is partly offset by $4,800 less regular depreciation that year.

A $110,600 deduction is not a $110,600 refund

A deduction lowers the income you pay tax on. What it saves depends on your tax rate and on how much of it you are allowed to use this year.

Here is the same example with three different answers to "how much can I use?" It uses a 32% federal rate as a stand-in and $2,450 of fees. The fees are a $950 study (the Rapid Report's starting price for a qualifying property), $600 for Form 3115 preparation under standard timelines, and an assumed $900 for your tax preparer. Your preparer's fee will differ. Ask.

Same building. Same study. Very different year.

A deduction you cannot use now may carry to a later year under the applicable rules. But you should know that before you pay, not after. Your preparer checks any owner-basis, at-risk, passive-activity, and excess-business-loss limits. The calculator does not decide whether a rental deduction can offset salary or other income. (IRS Publication 925; Form 461 instructions)

This table illustrates federal tax for one year at a flat rate. It leaves out bracket changes, other tax interactions, any deduction for the fees, state tax, later years, and tax when you sell.

Which year's bonus depreciation applies?

The original acquisition and placed-in-service dates, together with eligibility and elections. Ordering the study does not reset those dates.

This can be a major driver of your catch-up. Bonus depreciation lets you deduct a set share of qualifying short-life parts in the first year. The share depends on the dates.

Sources: IRS Publication 946 and IRS Notice 2026-11, which covers the January 19, 2025 date.

These are general rates for property that qualifies. A written binding contract can change the "acquired" date. An earlier choice to opt out, the transition election for the first tax year ending after January 19, 2025, and an ADS requirement also matter. New construction before late 2017 had its own rules; certain long-production-period property and aircraft have different timing rules. Your tax preparer confirms the rate.

So a study ordered in 2026 for qualifying property placed in service in 2024 generally uses the applicable 60% rate, subject to its acquisition facts and elections. Ordering later does not give that property today's 100% rate.

No bonus? A study can still help. The short-life parts still depreciate over 5, 7, or 15 years instead of 27.5 or 39.

How much is left to catch up, by year

Regular building depreciation closes the gap over time once the short-life parts have been fully deducted. Before then, the gap can grow or shrink; the original bonus rules and asset lives matter too.

This table shows the catch-up on a 2026 return for every $100,000 a study moves out of a residential building. It assumes a July purchase and service date in the listed year, an eligible used-property acquisition, the listed bonus rate with no election out, and all depreciation taken under the original building schedule. Short-life assets use the IRS half-year tables; the building uses 27.5-year GDS with the mid-month convention. Figures are rounded to the nearest $100. (IRS Publication 946, chapter 4 and Table A-1)

How much a study moves is the part we cannot tell you. That comes from the study. If a provider's estimate or proposal includes a preliminary allocation, you can use it to illustrate a scenario; it is not the final study result.

Does waiting cost you? In the unchanged-property example above, the catch-up is $115,400 on a 2026 return and $110,600 on a 2027 return. The $4,800 difference was deducted through regular depreciation along the way. That does not guarantee another filing opportunity or the same tax value: ownership, a sale, filing eligibility, tax rates, and loss limits can change. (Rev. Proc. 2025-23, sections 6.01 and 6.07)

What a look-back study costs

Budget for the study, any separate Form 3115 preparation, and your tax preparer's review and filing. The written quote should cover your property's history and the work required. The IRS charges no user fee for a qualifying automatic Form 3115; nonautomatic requests can carry a user fee. (Instructions for Form 3115)

A study price alone does not tell you the full cost. Compare four pieces: the study, the catch-up math, preparing Form 3115, and filing it.

These are the three offers we compare on this site. They are not every provider. Prices come from each provider's own pages, checked October 7, 2026. They are examples and starting prices, not quotes.

The math: $950 + $600 = $1,550. $2,320 + $600 = $2,920. $2,730 + $600 = $3,330.

Three things can push the cost higher:

• Your tax preparer's fee. No provider above files the form for you. Your preparer reviews it, files it, and updates your return. That fee is not in any price above. Unknown is not zero.
• Rush fees. R.E. Cost Seg says Form 3115 preparation and studies can carry a rush premium close to tax deadlines.
• An in-person visit. R.E. Cost Seg's engineered study includes a virtual inspection. An in-person visit costs extra.

Check the fit before you pick the lowest price

An older building often has a longer history. That history can put it outside a low-cost offer.

• CostSegregation.com advertises properties up to $1.5 million of building basis, while its FAQ says under $1.5 million. Confirm eligibility at that boundary. The FAQ describes a simplified way to combine acquisition and renovation costs when the improvements were completed in the same tax year. For a prior-year property with later improvements on different dates, it says the standard software is not designed for that situation and describes a separate approach. Ask KBKG and your preparer whether the proposed workflow covers every phase before paying.
• Rapid Report is for smaller residential rentals, up to four units. R.E.'s services page states less than 3,500 square feet per unit; its product page omits "per unit." Published dollar limits also differ at the boundary: $1.2 million of depreciable basis and $50,000 of renovations "or less" on the product page, but "under" those amounts in its FAQ. Confirm eligibility in writing, especially at a limit. Its product page excludes multi-unit properties with different layouts, mixed uses, or varying placed-in-service dates.
• Fully Engineered Study covers residential and commercial properties. R.E. lists no maximum depreciable basis, but the fee depends on property type, size, and complexity. Ask the provider to list every purchase, improvement, and date the study will cover. (R.E. Cost Seg services)

One more trap. The provider needs your tax basis, not what the building is worth today. R.E. Cost Seg describes it as purchase price plus improvements minus land. Have your preparer confirm the original depreciable basis and any adjustments; that shortcut does not fit every acquisition or conversion. For this calculator, do not subtract accumulated depreciation from the basis input. (IRS Publication 946)

If your building is simple and inside the limits, compare the two lower-cost options. If you renovated later or own something complex, start with the full-service scope.

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Request a proposal from R.E. Cost Seg

The R.E. Cost Seg proposal form covers both of its studies. Say which one you want, and say it is a look-back.

Who does what: Form 3115 and the handoffs

The study is only part of the job. The handoffs after it matter too.

1. You send the provider your closing statement, the placed-in-service date, and your current depreciation schedule.
2. The provider delivers the study. If those services are in your written scope, it also delivers the catch-up calculation and a prepared Form 3115 with supporting attachments. Otherwise, assign that work to your tax preparer.
3. Your tax preparer confirms the filing route, checks the numbers and signatures, puts the adjustment on your return, and attaches the original Form 3115 to that return.
4. Someone submits the signed duplicate Form 3115 by an IRS-permitted method: mail or private delivery to Ogden, or the current fax procedure. For the ordinary automatic route, it must go no earlier than the first day of the year of change and no later than the day the original is filed with the return. Decide who, in writing, and keep proof of submission. (IRS: Where to file Form 3115; Form 3115 instructions)
5. Your tax preparer updates your depreciation schedule for future years and handles your state return.

Form 3115 in plain words

• Form 3115 is the IRS form for changing an accounting method. A change in depreciation method, recovery period, or convention can count; correcting a simple math or posting error is different.
• A typical look-back uses the automatic procedure. You do not wait for IRS approval first, and there is no IRS fee. (Instructions for Form 3115)
• "Automatic" means you followed the set steps. It does not mean the IRS checked or approved your study.
• The ordinary change from an impermissible to a permissible depreciation method is change number 7, under Rev. Proc. 2025-23, section 6.01. Your preparer confirms eligibility, ownership at the start of the change year, and the right change number.
• A negative Section 481(a) adjustment generally goes into the year of change. Loss limits can still delay how much you use. A positive adjustment generally increases income over four years, with exceptions; it is not a catch-up deduction. (Form 3115 instructions, Part IV)

This step really does get missed

Two IRS rulings show how.

In one, a partnership attached Form 3115 to its return but missed the deadline for the separate Ogden copy. It sent that copy after discovering the oversight. (IRS letter ruling 202435004)

In another, an S corporation had a cost segregation study done and timely sent the signed Ogden copy. But the original form was omitted from the e-filed return, even though the return included the adjustment. (IRS letter ruling 201951002)

Both requested and received extra time through taxpayer-specific private letter rulings. These illustrate filing mistakes; they are not precedent or a guarantee of relief for someone else. A checklist can help prevent the same omissions.

Get the handoff sheet

Look-back deadlines

For an ordinary qualifying automatic change, Form 3115 goes with the timely filed return for the year of change, including a valid extension. If you file early, the signed duplicate is due no later than that filing date. Special procedures can differ.

For this automatic route, you do not need the study done by December 31. You need it done in time to file the return and Form 3115 properly.

For a change on a 2026 return, these are the standard calendar-year filing dates under current rules:

Dates can shift for weekends, holidays, and disaster relief. Confirm yours. Sources: individual filing guidance, Form 1065, Form 1120-S, Form 1120, and Form 7004 instructions. An extension to file does not generally extend the time to pay tax.

Leave room for the work. R.E. Cost Seg says a Rapid Report usually takes about 5 business days after payment and the questionnaire. It says an engineered study takes about 15 to 20 business days after it has your documents and the virtual inspection. These are study timelines; allow additional time for form preparation and tax filing.

What if you already filed the return?

You may still have time.

If you filed the original return on time, a qualifying automatic change may still fit the automatic six-month extension. The six months run from the return's original due date, not counting extensions. They do not run from the day you filed. Your preparer must meet all the requirements: file an amended return implementing the change within that period, attach the original Form 3115, submit the signed duplicate no later than that filing, provide any additional required copies, and attach the prescribed relief statement to each Form 3115 copy. The rule is in Rev. Proc. 2015-13, section 6.03(4)(a); the Form 3115 instructions point to it.

If you filed late, or the six months have passed, do not just amend. Ask your tax preparer whether other relief or another eligible year of change is available. Other late-filing relief generally requires unusual and compelling circumstances. If you use a later year, the adjustment must be recalculated for that year; it is not an automatically preserved deduction.

When a look-back is worth it, and when it is not

It is worth a real quote when the catch-up is meaningful, you can use the deduction, and you plan to keep the building.

Usually worth a closer look:

• Your short-life assets qualify for bonus depreciation. An eligible acquisition after September 27, 2017 can make the catch-up larger; the original dates and elections still control.
• Plenty of depreciable building basis remains.
• You can use the deduction this year. For example, you have other passive income, or your tax preparer confirms your rental losses are not limited.
• You plan to hold the building for years.

Needs a closer tax and cost comparison:

• You cannot use the loss. Rental losses are usually "passive." If your passive losses are more than your passive income, the extra generally waits for a later year. (IRS Publication 925)
• You plan to sell soon. Faster depreciation now can mean more tax at sale. Part of the gain can be taxed as ordinary income. It is not always a flat 25%. (IRS Publication 544)
• The catch-up is small. Check the by-year table above. On an old building, the fees can eat most of the gain.
• Your state does not follow federal bonus depreciation. The federal deduction can be large while the state one is small. Ask about your state.

A quick test from the example: at a 32% rate, $2,450 of fees takes about $7,656 of usable deduction to cover ($2,450 ÷ 0.32). That is only a break-even on fees for one year. It is not a rule to buy.

The question to ask your tax preparer: "How much of the extra deduction can I use this year, and what happens to the rest?"

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Not ready to compare? Start with your tax preparer and the handoff sheet. Come back once you know the filing route and how much you can use.

How far back can a look-back study go?

There is no 10-year limit. The catch-up can include every year since the building went into service, even years that are closed for refund claims. (Rev. Proc. 2025-23, section 6.01)

R.E. Cost Seg describes its look-back service as covering eligible property placed in service after 1986. That is the general starting point of MACRS, the current depreciation system. The filing conditions still matter. (IRS Publication 946)

The practical question is how much difference remains between the actual and corrected schedules. For example, a residential rental placed in service in July 1995 and continuously depreciated under the standard 27.5-year GDS schedule finishes recovering its original building basis in early 2023. If all those deductions were actually claimed and the corrected schedule also fully recovers the same basis, there is no remaining timing catch-up. Missed historical deductions and later improvements need their own review. (Publication 946; Rev. Proc. 2025-23, section 6.01(5))

Do not mix this up with the deadline for amended returns. Refund claims generally must be filed within three years after filing the return or two years after paying the tax, whichever is later, subject to additional rules. That limit does not cap the years inside an otherwise eligible Form 3115 catch-up. But the Form 3115 itself still has to be filed on time. (IRS Form 1040-X instructions)

Age alone does not predict the benefit. The original bonus rules, asset lives, depreciation already claimed, and available records all matter.

What if you renovated, lost records, or plan to sell?

Sources for these tax distinctions: IRS Publication 946, Publication 925, and Rev. Proc. 2025-23, sections 6.01 and 6.07.

What to get in writing from a provider

Ask for a written scope that ties the study to the tax work. It should name:

1. The property, every improvement, and every date covered.
2. The asset costs, classes, and depreciation lives, with support.
3. The method used and whether there is an inspection.
4. A tie-out to your original basis and your current depreciation schedule.
5. Who works out the catch-up (the Section 481(a) adjustment).
6. Who prepares Form 3115, who reviews it, who files it, and who submits the signed duplicate by an IRS-permitted method.
7. New depreciation schedules for future years.
8. What audit support covers, what it leaves out, and what costs extra.

On audit support, read the fine print. R.E. Cost Seg says it gives written answers about its study. It says that does not include representing you before the IRS or preparing or amending returns. KBKG says it answers written IRS questions about its report and can join calls. Neither one replaces your tax preparer.

The IRS audit guide, chapters 3–5, does not prescribe one study method or one specific preparer credential. It looks for an accurate, well-documented study prepared by someone with the relevant expertise. Following the guide does not mean the IRS has approved a particular study.

Look-back handoff sheet

Copy or print this. Fill in what you know. Send it to your tax preparer and to each provider you ask for a quote. It runs in your browser. Nothing is sent to us.

LOOK-BACK STUDY HANDOFF SHEET
From CostSegregationMatch. A discussion aid, not a quote or tax advice.

1. MY PROPERTY
Property type (residential rental / commercial):
Date bought:
Date placed in service (ready to rent or use):
Original depreciable building basis before depreciation, land not included:
Depreciation taken so far, and through what date:
Tax years already filed for this property:
Later improvements (date placed in service and cost for each one):
Did an earlier return elect out of bonus depreciation? (yes / no / not sure):
Any earlier cost segregation study or Form 3115 for this property?:
Do I plan to sell or exchange it? When?:
Tax year I want the change to go on, and whether that return is already filed:
Records I have (closing statement, depreciation schedule, invoices, photos):

2. WHO DOES WHAT (fill in a name for each line)
Does the property study:
Works out the catch-up amount (the Section 481(a) adjustment):
Prepares Form 3115 and its attachments:
Attaches the original Form 3115 to the tax return:
Submits the signed IRS duplicate by the IRS-permitted method (mail or fax), and by what date:
Checks current IRS filing guidance: https://www.irs.gov/instructions/i3115
Updates the depreciation schedule for future years:
Handles the state return:

3. QUESTIONS FOR MY TAX PREPARER
1. Which filing route fits my facts: Form 3115, an amended return, or something else?
2. What must you review first (old returns, elections, earlier changes)?
3. How much of the extra deduction can I use this year? What happens to the rest?
4. What is this year's depreciation on the old schedule and on the new one?
5. How does my state treat this?
6. If I sell in the next few years, how does this change my tax on the sale?
7. What is your fee to review, prepare, and file? Is the required separate IRS submission included?
8. What is the last day to file this for the tax year I want?

4. QUESTIONS FOR THE STUDY PROVIDER
1. Does this exact offer cover my property and every later improvement date?
2. Do you rebuild depreciation from my original placed-in-service date and tie it to my current schedule?
3. Is the catch-up calculation (Section 481(a)) included, extra, or not offered?
4. Is Form 3115 preparation included, extra, or not offered? What does it cost? Is there a rush fee?
5. Who signs and files the form? Who submits the required separate IRS copy?
6. What method do you use? Is there an inspection, and does an in-person visit cost extra?
7. If the IRS asks about the study or the catch-up number, what do you do, and what is left to my tax preparer?
8. What is the full written price, including anything billed separately?
9. What starts the delivery clock, and what date can you commit to?
10. What happens if your first review shows the study is not worth doing?

5. PRICES I WAS QUOTED (unknown is not zero)
Study fee:
Catch-up calculation:
Form 3115 preparation:
Tax preparer review and filing:
Other (inspection, rush, state work):
Total:

Common questions

Should I talk to my tax preparer before I buy a study?

Yes, if you can. You can request a proposal anytime. But knowing the filing route and how much deduction you can use keeps you from paying for a package that does not finish the job.

What if my tax preparer has never filed Form 3115?

It happens. You have two options. Pay a provider to prepare the form and the catch-up calculation, then have your preparer review and file it. Or find a preparer who files these often. R.E. Cost Seg says it will work with your CPA. CostSegregation.com says you can invite your CPA into its software.

Can I do a look-back with self-guided software?

Yes, if your property fits the software. CostSegregation.com is self-guided and lists a Section 481(a) schedule as included. Your tax preparer still prepares and files Form 3115.

Does a look-back study need a site visit?

Not always. The Rapid Report has no inspection. R.E. Cost Seg's engineered study uses a virtual inspection, with an in-person visit for an extra fee. What matters is that the study is supported and fits your property.

Will filing Form 3115 cause an audit?

We did not establish a reliable audit rate specifically for Form 3115 filers. The IRS's published examination-coverage table reports by type and size of return; it does not give a Form 3115-specific rate. Filing the form does not mean the IRS has approved the study. What you control is the paperwork: a study that ties to your records, and a form filed the right way. Ask each provider what records back up its work.

Your next step

If your tax preparer has confirmed the route and the deduction looks useful, compare the study offers by fit, total cost, and who handles the tax work.

Find My Cost Seg Provider

Still unsure about the filing route or how much you can use? Take the handoff sheet to your tax preparer first.

How we checked this page

The tax rules on this page come from IRS sources: the Form 3115 instructions, the "Where to file Form 3115" page, Publications 946, 925, and 544, the Cost Segregation Audit Techniques Guide (February 2025 edition), IRS Notice 2026-11, revenue procedures, and letter rulings. Sources are linked next to the claims they support. Prices and terms come from each provider's own pages. We checked the relevant provisions and current offers on October 7, 2026.

Provider prices and limits are the provider's own statements. They can change. We have not bought these studies.

The example and the property calculator use IRS half-year percentages for short-life assets and the mid-month straight-line formula for the building. They keep calculation precision until display, so a tax schedule using rounded IRS building-table percentages can differ slightly. They show how the math works; they do not calculate your return.

This page is education, not tax advice. Your tax preparer decides what applies to you. Found a mistake? Send a correction. Read how we compare providers.